Sec­ond-term eco­nomic blues

The Washington Times Weekly - - Editorials -

Dat­ing to the 1870s, midterm elec­tions dur­ing the sec­ond term of a pres­i­den­tial ad­min­is­tra­tion have not been kind to the po­lit­i­cal party oc­cu­py­ing the White House. More re­cently, in 1974 Repub­li­cans lost 47 House seats and five Se­nate seats. In 1986, Repub­li­cans lost five House seats and eight Se­nate seats, cost­ing them their Se­nate ma­jor­ity. De­fy­ing tra­di­tion, Democrats in 1998 ac­tu­ally gained four House seats with­out los­ing any in the Se­nate. In the sixth year of the Ge­orge W. Bush ad­min­is­tra­tion, Repub­li­cans will be de­fend­ing their con­gres­sional ma­jori­ties in less than three months. With the eco­nomic and po­lit­i­cal cy­cles about to merge, now would be a good time to re­view how the econ­omy has per­formed dur­ing the first five and a half years of the Bush ad­min­is­tra­tion and to com­pare that per­for­mance with the three most re­cent two-term ad­min­is­tra­tions (Nixon, Rea­gan and Clin­ton):

Over the last five and a half years, gross do­mes­tic prod­uct (GDP) has in­creased at an av­er­age an­nual rate of 2.6 per­cent. Dur­ing the first five and a half years of the other ad­min­is­tra­tions, GDP grew at av­er­age an­nual rates of 3 per­cent (Nixon), 3.3 per­cent (Rea­gan) and 3.5 per­cent (Clin­ton). Dur­ing the 24-month pe­riod end­ing in June 2006, eco­nomic growth av­er­aged 3.3 per­cent per an­num. Pre­vi­ously, dur­ing the two years end­ing with the sec­ond quar­ter of the sec­ond­midterm-elec­tion year, GDP in­creased by 3.1 per­cent per year (Nixon), 3.7 per­cent per year (Rea­gan) and 4.1 per­cent per year (Clin­ton).

In the la­bor mar­ket, be­tween Jan­uary 2001 and July 2006, private-sec­tor non­farm pay­rolls in­creased by 1.6 per­cent (1.8 mil­lion jobs). Be­tween Jan­uary 1969 and July 1974, private-sec­tor jobs in­creased by 12.4 per­cent (7.1 mil­lion jobs). From Jan­uary 1981 to July 1986, private-sec­tor pay­rolls in­creased by 10.7 per­cent (8 mil­lion jobs). From Jan­uary 1993 to July 1998, private-sec­tor em­ploy­ment rose by 16.7 per­cent (15.2 mil­lion jobs). Fo­cus­ing only on the 36 months pre­ced­ing Au­gust of the sec­ond­midterm-elec­tion year, we find that private pay­rolls in­creased by 10.4 per­cent (6 mil­lion jobs) in the Nixon ad­min­is­tra­tion; 11.1 per­cent (8.3 mil­lion jobs) in the Rea­gan ad­min­is­tra­tion; 8.4 per­cent (8.2 mil­lion jobs) in the Clin­ton ad­min­is­tra­tion; and 4.8 per­cent (5.2 mil­lion jobs) in the cur­rent ad­min­is­tra­tion.

Re­gard­ing the un­em­ploy­ment rate, the elec­torate does not only judge the party oc­cu­py­ing the White House based on the cur­rent rate; vot­ers also re­act to how the un­em­ploy­ment rate has changed over time. In this con­text, the Bush ad­min­is­tra­tion in­her­ited a 4.2 per­cent un­em­ploy­ment rate in Jan­uary 2001. The job­less rate reached its cycli­cal peak in June 2003 (6.3 per­cent). Twelve months ago, it was 5 per­cent; and to­day it is 4.8 per­cent, hav­ing in­creased in July by 0.2 per­cent from its post-re­ces­sion low of 4.6 per­cent.

The Nixon ad­min­is­tra­tion in­her­ited a 3.4 per­cent un­em­ploy­ment rate. In July 1974, in the midst of a re­ces­sion, the job­less rate was 5.5 per­cent, hav­ing in­creased from 4.8 per­cent a year ear­lier. On elec­tion day in Novem­ber 1974, the rate was 6.6 per­cent, the high­est level it had reached in the Nixon-Ford ad­min­is­tra­tion to that point. (It would even­tu­ally peak at 9 per­cent the fol­low­ing spring).

Pres­i­dent Rea­gan in­her­ited an un­em­ploy­ment rate of 7.5 per­cent, which peaked at 10.8 per­cent in Novem­ber-De­cem­ber 1982 be­fore steadily fall­ing over the next three years. In July and Novem­ber 1986, the job­less rate was 7 per­cent. In the Clin­ton ad­min­is­tra­tion, which in­her­ited an un­em­ploy­ment rate of 7.3 per­cent, the job­less rate fell for eight con­sec­u­tive years. By July 1998, it was 4.5 per­cent, fall­ing to 4.4 per­cent on elec­tion day.

Through 2004, the latest year avail­able, real (i.e., in­fla­tion-ad­justed) me­dian house­hold in­come (the in­come level at the mid­point of the in­come stream) had fallen for five con­sec­u­tive years. Mea­sured in 2004 dol­lars, it was $44,389 that year, 3.6 per­cent be­low its 2000 level of $46,058. By con­trast, real me­dian house­hold in­come in­creased by 1.3 per­cent from 1968 ($37,044) to 1974 ($37,519); by 6.5 per­cent from 1980 ($38,453) to 1986 ($40,939); and by 11.3 per­cent from 1992 ($40,422) to 1998 ($45,003), which ex­ceeds the 2004 level ($44,389).

In Jan­uary 2001, Pres­i­dent Bush in­her­ited an in­fla­tion rate of 3.7 per­cent, mea­sured by the 12-month change in the con­sumer price in­dex. A year ago it was 3.2 per­cent, nearly a point be­low to­day’s in­fla­tion rate of 4.1 per­cent. Mr. Nixon in­her­ited a 4.4 per­cent in­fla­tion rate, which reached 11.5 per­cent in July 1974, hav­ing in­creased from 5.7 per­cent a year ear­lier. It was 12.2 per­cent on elec­tion day. Pres­i­dent Rea­gan in­her­ited a 11.8 per­cent in­fla­tion rate, which fell to 3.6 per­cent in July 1985, 1.6 per­cent in July 1986 and 1.3 per­cent on elec­tion day. The in­fla­tion rate in Jan­uary 1993 was 3.3 per­cent, which de­clined to 2.2 per­cent in July 1997, 1.7 per­cent in July 1998 and 1.5 per­cent on elec­tion day.

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